Gary W. Rich and Law Office of Gary W. Rich v. Joseph Simoni, etc. , 235 W. Va. 142 ( 2015 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2015 Term FILED
__________
April 10, 2015
released at 3:00 p.m.
No. 14-0998 RORY L. PERRY II, CLERK
__________ SUPREME COURT OF APPEALS
OF WEST VIRGINIA
GARY W. RICH and LAW OFFICE OF GARY W. RICH, L.C.,
Plaintiffs/Counter-Defendants/Third-Party Plaintiffs Below, Petitioners
v.
JOSEPH SIMONI,
Defendant/Counter-Plaintiff Below, Respondent
v.
COCHRAN, CHERRY, GIVENS, SMITH, LANE & TAYLOR, P.C.,
Third-Party Defendant/Counter-Claimant Below, Respondent
v.
LEVIN, PAPANTONIO, THOMAS, MITCHELL, RAFFERTY & PROCTOR, P.A.,
Third-Party Defendant/Counter-Claimant Below, Respondent
v.
BARON AND BUDD, P.C.,
Third-Party Defendant/Counter-Claimant Below, Respondent
______________________________________________________
Certified Question from the United States District Court
for the Northern District of West Virginia
CERTIFIED QUESTION ANSWERED
_______________________________________________________
Submitted: March 4, 2015
Filed: April 10, 2015
Richard W. Gallagher, Esq. Jeffrey M. Wakefield, Esq.
E. Ryan Kennedy, Esq. Caleb P. Knight, Esq.
Robinson & McElwee, PLLC Flaherty Sensabaugh Bonasso, PLLC
Clarksburg, West Virginia Charleston, West Virginia
Counsel for Joseph Simoni, Ph.D.
Tillman J. Finley Pro Hac Vice
Marino Finley Law, PLLC William F. Cash III, Pro Hac Vice
Washington, D.C. Levin Papantonio, Thomas, Mitchell,
Counsel for Petitioners Rafferty & Proctor, P.A.
Pensacola, Florida
Counsel for Levin, Papantonio et al.
Christopher J. McCarthy, Esq.
Booth & McCarthy
Bridgeport, West Virginia
Counsel for Third-Party Respondents
JUSTICE LOUGHRY delivered the Opinion of the Court.
JUSTICE BENJAMIN concurs and reserves the right to file a concurring opinion.
SYLLABUS BY THE COURT
1. “A de novo standard is applied by this Court in addressing the legal
issues presented by a certified question from a federal district or appellate court.” Syl. Pt.
1, Light v. Allstate Ins. Co., 203 W.Va. 27, 506 S.E.2d 64 (1998).
2. Rule 5.4 of the West Virginia Rules of Professional Conduct, which
proscribes the sharing of fees between lawyers or law firms and nonlawyers, is an explicit
judicial declaration of West Virginia public policy with the force and effect of law.
3. A fee-sharing agreement between a lawyer or a law firm and a non-lawyer
that violates the provisions of Rule 5.4 of the West Virginia Rules of Professional Conduct
is void as against public policy and wholly unenforceable.
LOUGHRY, Justice:
This case is before us on certified question from the United States District
Court for the Northern District of West Virginia and presents the issue of whether the West
Virginia Rules of Professional Conduct (“Rules of Professional Conduct”) are statements
of public policy with the equivalent legal force and effect as statutes enacted by the West
Virginia Legislature. The underlying case involves the issue of whether a fee-sharing
agreement between the individual petitioner, an attorney, and the respondent, a non-lawyer,
is enforceable. Upon our consideration of this issue, we answer the certified question, as
modified, in the affirmative.
I. Factual and Procedural Background
Beginning in the 1990s and continuing until 2011, the petitioner, Gary W.
Rich, practiced law in Morgantown, West Virginia.1 The respondent, Joseph Simoni, Ph.D.,
is a former professor in West Virginia University’s (“WVU’s”) Department of Sociology
and Anthropology. While on the faculty at WVU, Dr. Simoni attended the West Virginia
University College of Law; he successfully obtained a doctor of jurisprudence from the
WVU College of Law in 1995. Despite sitting for the West Virginia bar examination four
1
Mr. Rich was admitted to the Bar of this state in 1980.
1
separate times, Dr. Simoni never obtained a passing score on the examination.2 As a result,
he has never been admitted to practice law in this state or in any other jurisdiction.
In 1999, Mr. Rich and Dr. Simoni met through a mutual friend due to their
respective interests in an asbestos case known as the WVU litigation.3 Addressing that
litigation, Dr. Simoni stated that he and another “WVU faculty colleague were the driving
force behind the organization of University employees and the investigation of asbestos
exposure in many University buildings.” Through this collaboration, Mr. Rich and Dr.
Simoni learned of other potential environmental and toxic tort mass cases, including two
actions known as the Fairmont4 litigation and the Spelter5 litigation. According to Dr.
Simoni, he organized initial meetings and was the primary contact for the plaintiffs in the
2
He did, however, pass the multi-state professional responsibility examination on at
least two occasions–an examination designed to measure knowledge of ethical standards
pertaining to the practice of law.
3
Mr. Rich was introduced to Dr. Simoni as someone who could provide assistance
in connection with a potential class action comprised of individuals claiming exposure to
asbestos fibers in WVU buildings. According to Mr. Rich, Dr. Simoni had “a long history
of community activism in various communities in West Virginia.”
4
This litigation involved a class action of plaintiffs who allegedly suffered illnesses
from contact with chemicals used at the Philips/Westinghouse Lighting Plant in Fairmont,
West Virginia. As the result of a settlement reached in 2007, Mr. Rich and his associated
counsel were awarded 25% of the fee award of $14,600,000.
5
Environmental contamination allegedly arising from a zinc-smelting plant in Spelter,
West Virginia, was the focus of this class action. The matter proceeded to trial and resulted
in a plaintiffs’ verdict. After remand for the purpose of recalculating punitive damages, Mr.
Rich and his associated counsel were awarded 22.5% of the total fee award of $22,800,000.
2
Fairmont and Spelter litigations. In addition to serving as the critical liaison between
counsel and the plaintiffs, Dr. Simoni claims to have obtained key documents; organized
property access for sample collection purposes; and researched filing fees, environmental
cases, and pivotal toxic tort questions. Due to Mr. Rich’s lack of expertise in these areas of
practice6 and his lack of resources to prosecute those cases, the decision was made to engage
several out-of-state law firms to assist with these class actions.
The underlying litigation arose from an agreement between Mr. Rich and Dr.
Simoni to compensate Dr. Simoni for his efforts in connection with various class action
suits, including the Fairmont and Spelter litigations. According to Dr. Simoni, his initial
understanding when he and Mr. Rich first agreed to work together was that they would
“share the benefits half/half, 50/50.” That notion of an even split continued until April 2002
when a discussion ensued outside Mr. Rich’s Morgantown, West Virginia, office. During
this meeting, Mr. Rich purportedly informed Dr. Simoni that “he was reducing [Dr.
Simoni’s] share from 50 percent to 20 percent.”
As related by the district court in its memorandum order,7 Mr. Rich allegedly
6
At one point, Mr. Rich’s practice was largely devoted to immigration law. Dr.
Simoni submits that “[t]he professional relationship between Dr. Simoni and Mr. Rich was
driven, in large part, by the fact that Mr. Rich’s law experience was inadequate to prosecute
environmental and toxic tort class actions.”
7
The order was entered on September 30, 2014.
3
agreed several months later to reinstate the 50/50 fee split between Dr. Simoni and himself.
Further discussions reportedly ensued in December 2003 between Dr. Simoni and Mr. Rich
regarding the issue of compensation. While the two individuals were at a coffee shop in
Waynesburg, Pennsylvania, Dr. Simoni recalled Mr. Rich broaching the fee arrangement
topic, stating “he was changing the agreement again from the 50/50 that we had gotten to,
back to in the late fall of 2002, that he was changing it back to the 80/20.”8
The next fee-related discussions between Dr. Simoni and Mr. Rich reportedly
occurred in June 2005 while the two individuals were at a picnic shelter along the Rail-Trail
path in Morgantown, West Virginia. During that meeting Mr. Rich suggested that they
should communicate in writing rather than verbally. Dr. Simoni’s notes from that meeting
“reflect that Rich confirmed his intention to pay Simoni 20% of the total compensation Rich
received from the Fairmont and Spelter Litigations.” As he clarified during his deposition,
Dr. Simoni’s expectation of compensation was tied to a successful result. If the case did
not result in a plaintiffs’ verdict, he would “[g]et zero.”
During the summer of 2007, Dr. Simoni spoke with an attorney from the
Cochran firm, one of the out-of-state law firms engaged by Mr. Rich, with regard to
8
The memorandum opinion reflects that “Simoni became ‘visibly upset,’ and left the
coffee shop in tears.”
4
compensation tied to the Spelter litigation. Concerned that he “was being left out, you
know, . . . left out to dry,” Dr. Simoni asked this attorney to inform him when the Spelter
litigation was finalized. After notifying him several months later regarding the conclusion
of the Spelter litigation, the Cochran law firm subsequently emailed Dr. Simoni to “make
sure you have submitted all final invoices to our office concerning” the Spelter litigation.
Dr. Simoni indicated he “didn’t send any invoices” in response to this request. In
explanation, he testified: “[S]ince my compensation, as I understood, would come from the
agreement that I had with Rich, . . . not until the cases were settled and based on my
contributions and the value of my contributions, [I] never had the thought or expectation of
having to keep hours of work or anything like that.”9 The record makes clear that Dr.
Simoni’s expectation of fee recovery was linked to “the prospect of ‘percentage split of
attorney fees earned by Rich.’”10
In response to Dr. Simoni’s recitation of the fee-related agreement and
discussions, Mr. Rich represents that he was initially under the impression that Dr. Simoni
9
During the pendency of the underlying litigation, Dr. Simoni reconstructed what he
views as “a reasonable list of the activities and hours expended in support of both the
Philips/Westinghouse Litigation and the Spelter Litigation.” The “after-the-fact” document
represents that he spent 3078 hours working on those matters between March 2000 and
August 2005.
10
At the same time, however, Dr. Simoni acknowledged in his deposition that he “had
the general understanding of a lawyer not being able to split fees.”
5
was a licensed attorney.11 Thus, the possibility of a fee-sharing agreement initially arose
while he was under the mistaken impression that Dr. Simoni had been admitted to the bar.
Once he realized in 2000 or 2001 that Dr. Simoni was not a licensed attorney, Mr. Rich
states he informed Dr. Simoni that he would first need to pass the bar before he could
participate in any fee-sharing arrangement.12 Based on concerns he had regarding the
propriety of fee-sharing for work performed prior to licensure, Mr. Rich contacted Sherri
Goodman, former Chief Lawyer Disciplinary Counsel of the West Virginia State Bar.13 She
reportedly informed Mr. Rich that Dr. Simoni “might not be able to get paid ethically.”
On January 13, 2012, Mr. Rich filed a complaint in the district court seeking
a declaratory judgment on the issue of whether Dr. Simoni was entitled to compensation for
services or activities performed in connection with the Fairmont and the Spelter litigations.14
11
He claims to have reached this conclusion based on the fact that Dr. Simoni “had
a law degree, made references to law school, and was, apparently, involved in litigation.”
12
The record reflects that the fourth and final time Dr. Simoni sat for the bar exam
was in 2002.
13
Mr. Rich indicated during his deposition that he contacted Ms. Goodman on
multiple occasions with regard to the ethical issues associated with paying Dr. Simoni for
his work on all three cases–the WVU litigation, the Spelter litigation, and the Fairmont
litigation. He indicated that it was sometime in 2006 or 2007 when he would have had a
conversation with Ms. Goodman where she indicated that quantum meruit would likely be
the only type of recovery that Dr. Simoni could obtain.
14
Dr. Simoni’s threat to file complaints in state court, addressing compensation claims
for the Fairmont and Spelter litigations, was the impetus for filing the district court action.
In March 2010, Dr. Simoni, through counsel, sought compensation from six plaintiffs’ firms
6
He sought a ruling as to whether a sharing of legal fees with Dr. Simoni would violate Rule
5.4 of the West Virginia Rule of Professional Conduct.15 In response, Dr. Simoni filed a
counterclaim and then an amended counterclaim, through which he alleged that Mr. Rich
is obligated to compensate him for work related to the Fairmont and Spelter litigations under
theories of quantum meruit, unjust enrichment, and breach of implied contract.16
Responding to the counterclaims filed by Dr. Simoni, Mr. Rich filed a third-party complaint
against three out-of-state law firms17 involved in those class actions, asserting rights of
indemnity and contribution in connection with any amounts he is determined to owe Dr.
Simoni.18
At the conclusion of discovery in the district court proceeding, the parties filed
involved in the Spelter litigation by means of written correspondence to which two draft
complaints were attached; in April 2010, a similar written request for compensation was sent
to the three plaintiffs’ firms involved in the Fairmont litigation. Despite Dr. Simoni’s
demands, which included a $1 million demand in the Spelter litigation, no payments were
made by the solicited firms.
15
Rule 5.4 provides, in pertinent part, that “[a] lawyer or law firm shall not share legal
fees with a nonlawyer . . . .” W.Va. R. Prof’l Conduct 5.4.
16
Dr. Simoni also included three additional legal theories, each of which has been
dismissed by the district court. Those theories were grounded on allegations of negligent
misrepresentation, conversion, and estoppel.
17
Those law firms are Levin Papantonio et al., the Cochran firm, and Baron & Budd.
18
Those three law firms counterclaimed against Mr. Rich, asserting claims predicated
on breach of contract, fraud, unjust enrichment, indemnity, and contribution.
7
motions for summary judgment. In addition to dismissing three counts of Dr. Simoni’s
counterclaim against Mr. Rich,19 the district court certified the following question to this
Court: “Are the West Virginia Rules of Professional Conduct statements of public policy
with the force of law equal to that given to statutes enacted by the West Virginia State
Legislature?”
II. Standard of Review
As we recognized in syllabus point one of Light v. Allstate Insurance Co., 203
W.Va. 27, 506 S.E.2d 64 (1998), “[a] de novo standard is applied by this Court in
addressing the legal issues presented by a certified question from a federal district or
appellate court.” Bearing this plenary standard of review in mind, we proceed to consider
the certified question presented by the district court.
III. Discussion
Squarely presented in this case is the issue previously avoided by this Court
in Gaddy Engineering Co. v. Bowles Rice McDavid, 231 W.Va. 577, 746 S.E.2d 568 (2013):
Whether a fee-sharing agreement between a lawyer and a non-lawyer is unenforceable as
contrary to the public policy of this state. Having accepted the certified question presented
by the district court, we must now determine whether this state’s Rules of Professional
19
See supra note 16.
8
Conduct constitute statements of public policy that carry the force and effect of legislative
enactments. While the question presents a matter of first impression for this Court, multiple
courts have confronted this issue and determined, with little difficulty, that a fee-sharing
agreement which violates the professional rules of conduct is unenforceable as contrary to
public policy. See id., 231 W.Va. at 589, 746 S.E.2d at 580. (Loughry, J., concurring, and
Davis, J., joining).20
As Dr. Simoni acknowledges, “a licensed lawyer is ethically prohibited from
sharing legal fees with a non-lawyer under Rule 5.4 of the West Virginia Rules of
Professional Conduct.” That rule, which has several inapplicable exceptions, states with
certainty that both lawyers and law firms shall not share fees with a non-lawyer.21 See
W.Va. R. Prof’l Conduct 5.4; Lawyer Disciplinary Bd. v. Duty, 222 W.Va. 758, 671 S.E.2d
763 (2008) (recognizing that lawyer may not directly or indirectly share legal fees with non-
lawyer). Notwithstanding this clearly stated prohibition, Dr. Simoni submits that this ethical
rule is not the same as an outright legal prohibition of fee-sharing. Arguing that the Rules
20
For ease of reference, the concurrence authored by Justice Loughry and joined by
Justice Davis, will be cited throughout the remainder of this opinion without notation of the
joining justice’s identity.
21
A nonlawyer refers to anyone who does not hold a valid law license, including those
individuals who hold a law degree or previously held a law license. See In Re Discipio, 645
N.E.2d 906, 912-13 (Ill. 1994).
9
of Professional Conduct are nothing more than rules of reason,22 Dr. Simoni posits that those
rules cannot stand as a bar to the enforcement of a fee-sharing agreement that is predicated
on the reasonable value of services provided.23 Consequently, he urges us to find that the
Rules of Professional Conduct do not have the equivalent weight to laws enacted by our
state legislature.
While professing to occupy a position of neutrality by refusing to weigh in on
the ultimate issue, Mr. Rich nonetheless invites the Court to devise a lawful manner of
compensating Dr. Simoni.24 Like Dr. Simoni, Mr. Rich is amenable to altering the certified
question in a manner that would require application of quantum meruit principles to an
22
See W.Va. R. Prof’l Conduct, scope (“The Rules of Professional Conduct are rules
of reason.”).
23
In making this argument, Dr. Simoni necessarily reframes the certified question to
pose whether the Rules of Professional Conduct prohibit fee-sharing agreements between
lawyers and non-lawyers where the agreement contemplates payment based on the
reasonable value of services provided–i.e. quantum meruit recovery. Not only is this an
improper attempt to engraft quantum meruit-based recovery into the certified question, but
the district court was clear in its memorandum order that this type of equitable-based
recovery is inconsistent with Dr. Simoni’s amended counterclaim in that his claim relies on
the existence of a fee-splitting agreement. The district court opined in its memorandum
order that “the evidence adduced in discovery . . . reinforces that his [Dr. Simoni’s]
compensation claim remains based entirely on a fee-splitting agreement with Rich.”
24
Mr. Rich states that he has no issue paying Dr. Simoni, provided that such payment
can be accomplished within the boundaries of both ethical and legal constraints. This
willingness to compensate Dr. Simoni for “the reasonable value of his time,” however, is
expressly conditioned on the filing of “a legally-viable, factually-supported, and ethically-
proper” pleading, which is further subject to the condition that the requested payment be
“limited to services Dr. Simoni performed for or at the direction of Mr. Rich.”
10
otherwise prohibited fee-sharing agreement. In this fashion, both Dr. Simoni and Mr. Rich
seek to circumvent the panoply of reasons against this type of fee sharing between lawyers
and non-lawyers discussed at length in the concurrence to Gaddy Engineering. See 231
W.Va. at 589-91, 746 S.E.2d at 580-82.
We begin our analysis by reviewing the authority which supports a finding that
the Rules of Professional Conduct are statements of public policy. As the concurring
members of the Court recognized in Gaddy Engineering:25
Numerous other courts, when presented with the issue of
whether rules which govern attorney conduct constitute
statements of public policy, have resoundingly determined that
rules of professional conduct contain explicit declarations of a
state’s public policy. See Fields v. Ratfield, No. A132766, 2012
WL 5359775 at *9 (Cal.App. 2012) (“The Rules of Professional
Conduct are not only ethical standards to guide the conduct of
members of the bar; but they also serve as an expression of
public policy to protect the public.”) (internal quotation marks
omitted); Cruse v. O’Quinn, 273 S.W.3d 766, 776 (Tex. App.
2008) (finding that disciplinary rules constitute an expression
of Texas public policy on issue of fee-sharing agreements);
Evans & Luptak, PLC v. Lizza, 251 Mich. App. 187, 650
N.W.2d 364, 370 (2002) (recognizing “fundamental principle
that contracts that violate our ethical rules violate our public
policy and therefore are unenforceable”); Brandon v. Newman,
243 Ga. App. 183, 532 S.E.2d 743, 747 (2000) (upholding trial
court’s ruling that state bar disciplinary provisions establish
public policy of disapproving of fee-sharing agreements with
nonlawyers); Albert Brooks Friedman, Ltd. v. Malevitis, 304 Ill.
App. 3d 797, 238 Ill. Dec. 46, 710 N.E.2d 843, 846 (1999)
25
See supra note 20.
11
(“Supreme court rules have the force of law and are indicative
of public policy in the area of attorney conduct[.]”).
Gaddy Engineering, 231 W.Va. at 589, 746 S.E.2d at 580.
Specifically addressing the issue of whether statements of public policy are
limited to the enactments of a legislative body, the concurring members looked to the
recently issued decision of Martello v. Santana, 713 F.3d 309 (6th Cir. 2013). In affirming
the trial court’s ruling that a fee-sharing agreement between an attorney and a physician was
unenforceable as violating public policy,26 the Sixth Circuit wholly rejected the argument
that “‘public policy can only be created by the Kentucky Legislature,’ . . . reason[ing] that
‘the Kentucky Rules of Professional Conduct are public policy set by the Kentucky Supreme
Court.’” Gaddy Engineering, 231 W.Va. at 589, 746 S.E.2d at 580 (quoting Martello, 713
F.3d at 313). In support of this conclusion, the Sixth Circuit observed that the Restatement
(Second) of Contracts, in referring to the use of legislation to identify public policy
violations, defines “legislation ‘in the broadest sense to include any fixed text enacted by a
body with authority to promulgate rules. . . .’” Id. (quoting Restatement (Second) of
Contracts § 178 cmt. (1981)).
26
In finding the violation of public policy in Martello, the trial court looked to Rule
5.4 of the Kentucky Rules of Professional Conduct, a rule which parallels the provisions of
this state’s Rule 5.4 of the Rules of Professional Conduct by prohibiting fee-sharing
agreements between lawyers or law firms and nonlawyers. See Gaddy Engineering, 231
W.Va. at 589, n.4, 746 S.E.2d at 580 n.4 (Loughry, J., concurring).
12
Frequently cited as authority for the position that rules of professional conduct
constitute declarations of public policy is Trotter v. Nelson, 684 N.E.2d 1150 (Ind.1997),
abrogated on other grounds by Liggett v. Young, 877 N.E.2d 178 (Ind. 2007), a case in
which the Indiana Supreme Court reasoned:
The Rules of Professional Conduct, as enacted by this
Court, contain both implicit and explicit declarations of public
policy. The Indiana Rules of Professional Conduct exist, to a
large extent, as a means of protecting the interests of the public
as potential clients. “These Rules and this Court’s willingness
to enforce them help ensure that the public is well served by the
bar. Forces that undermine the standards on which the Rules of
Professional Conduct are founded disserve the public by
weakening the client-lawyer relationship.”
684 N.E.2d at 1153 (footnote and internal citation omitted). In Trotter, the court recognized
“the heightened import of the Rules that are framed imperatively:
Certain of the Rules are explicit declarations of what an
attorney can or cannot do. They are ‘cast in the terms “shall” or
“shall not.”’ Prof. Cond. R. Preamble, Scope. Some of these
imperatives concern agreements that an attorney can or cannot
enter into. The Rules at issue in this case (Rules 5.4(a) and
7.3(f)) are such imperatives. Rules 5.4(a) and 7.3(f) are explicit
judicial declarations of Indiana public policy and, akin to
contravening a statute, agreements in violation of these rules
are unenforceable.”
Gaddy Engineering, 231 W.Va. at 590, 746 S.E.2d at 581 (Loughry, J., concurring) (quoting
Trotter, 684 N.E.2d at 1153 (emphasis supplied)).
Fully detailed in Trotter are the reasons against fee-splitting agreements:
13
Rule 5.4(a) prohibits an attorney from sharing legal fees with a
nonlawyer. This Rule states the public policy against
fee-splitting with a nonlawyer. . . . [F]ee-splitting with a
nonlawyer is disfavored because of its potential affect on the
client-attorney relationship. For example, fee-splitting with a
nonlawyer provides the incentive for a nonlawyer to
recommend an attorney’s services for their own pecuniary
interests rather than the client’s legal best interests.
Furthermore, fee-splitting provides a potential disincentive to
the attorney to devote their full time and energy to the client, as
the attorney must share fees with another who has done little to
earn it. Finally, fee-splitting might interfere with the attorney’s
“professional independence of judgment.” Thus, in general,
fee-splitting agreements with a nonlawyer are contrary to
Indiana public policy and unenforceable.
684 N.E.2d at 1154-55 (internal citations omitted); accord O’Hara v. Ahlgren, Blumenfeld
& Kempster, 537 N.E.2d 730, 734-35 (1989) (discussing “variety of harms” associated with
fee-sharing agreements and recognizing that “[t]he public is best served . . . by [attorney]
recommendations uninfluenced by financial considerations”).
Responding to the cautionary admonition regarding the use of the Rules of
Professional Conduct in civil actions,27 the concurring members of the Court explained the
27
In the scope section of the Rules of Professional Conduct in effect at the time of the
actions at issue, it is provided that the “[v]iolation of a Rule should not give rise to a cause
of action nor should it create any presumption that a legal duty has been breached.” The
Rules further state that “[t]hey are not designed to be a basis for civil liability.” W.Va. R.
Prof’l Conduct, scope. While not relevant to the action before us, we note that under the
Rules of Professional Conduct that took effect on January 1, 2015, the scope section has
been amended to recognize that “since the Rules do establish standards of conduct by
lawyers, a lawyer’s violation of a Rule may be evidence of breach of the applicable standard
of conduct.”
14
“obvious distinction between the concern expressed in the scope section of the Rules that
they are not to serve as a basis for civil liability and the assertion by a defendant of a rule in
defense to the enforcement of an allegedly illegal contract.” Gaddy Engineering, 231 W.Va.
at 591 n.6, 746 S.E.2d at 582 n.6. In Evans & Luptak, PLC v. Lizza, 650 N.W.2d 364(Mich. App. 2002), the appellate court considered the argument that its rules of professional
conduct could not be used as a defense to the plaintiff’s breach of contract claim based on
the provision within the rules which states that the rules “do not give rise to a cause of action
for enforcement of a rule or for damages caused by a failure to comply with an ethical
obligation.” Id. at 368. Reinforcing the critical distinction between employing the rules as
a source of liability and asserting the rules as a legal defense, the Michigan appellate court
sanctioned using the rules “as a defense that the alleged contract is unethical because it
violates our public policy as expressed in the Michigan Rules of Professional Conduct.” Id.Specifically rejecting reliance on the language which indicates the rules are for disciplinary
purposes only and may not be used to support or shield against civil liability, the court
observed the absurdity that would result if the judicial system assisted a party in enforcing
an agreement that is in furtherance of a purpose which violates public policy. Id. at 369; see
also Institutional Labor Advisors, LLC v. Allied Resources, Inc., 2014 WL 4211196 at *5
(W.D. Ky. Aug. 25, 2014) (affirming Martello holding that courts will not enforce contracts
which violate public policy while rejecting as inapposite litigant’s citation of decision where
court refused to recognize cause of action predicated on alleged violation of ethical rule).
15
As explained in the Gaddy Engineering concurrence, “[t]he fact that one party
may benefit from an illegal fee-sharing agreement does not tip the proverbial scales of
justice in favor of enforcement.” Gaddy Engineering, 231 W.Va. at 591, 746 S.E.2d at 582.
The reason for rejecting a parity-based result is rooted in the weightier and overarching
concern for protecting prospective clients:
Martello asserts that voiding these contracts would create
a windfall for Santana at Martello’s expense. This argument,
while possibly true, is unpersuasive. The Rules of Professional
Conduct were not created to protect non-lawyers who enter into
contracts with attorneys, but were instead designed to ensure
both that the judicial process is ethical and to protect potential
clients.
Martello, 713 F.3d at 314 (emphasis supplied); accord Trotter, 684 N.E.2d at 1155
(“[W]hen a court determines that a contract must be declared void as against public policy,
it does so on the grounds that the good of the public as a whole must take precedence over
the circumstances of the individual, no matter the hardship or inequities that may result.”);
see also Infante v. Gottesman, 558 A.2d 1338, 1344 (1989) (“While we recognize that our
decision may unjustly enrich defendant to the extent that he has received the benefit of any
investigative and paralegal services performed by plaintiff, the pervasive proscriptions
against such agreements require that we not render any assistance to these parties.”);
O’Hara, 537 N.E.2d at 737-38 (rejecting plaintiffs argument that lay persons be permitted
to enforce fee-sharing agreement, stating that “[b]y refusing in every case to assist the lay
party, courts may deter laypersons as well as attorneys from attempting such agreements”
16
and “in this way, the public will be protected more effectively from the potential harms
posed by fee-sharing agreements”).
In view of the highly persuasive authority throughout the country on this issue,
we have no difficulty recognizing that the Rules of Professional Conduct may constitute
statements of public policy which in turn may carry the equivalent force and effect as
statutes enacted by this state’s legislature. That determination will need to be made on a rule
by rule basis, however, given that some of the rules are stated in mandatory terms while
others are expressed in hortatory terms only. See Trotter, 684 N.E.2d at 1153 (recognizing
elevated significance of rules cast in terms of “shall” and “shall not”); Allied Resources,
2014 WL 4211196 at *5 (recognizing that “Rules of Professional Conduct may reflect
Kentucky’s public policy in proper circumstances”). Finding the need to slightly modify the
certified question to make it applicable to the specific rule at issue in this case,28 we now
hold that Rule 5.4 of the West Virginia Rules of Professional Conduct, which proscribes the
sharing of fees between lawyers or law firms and nonlawyers, is an explicit judicial
declaration of West Virginia public policy with the force and effect of law. Accordingly,
a fee-sharing agreement between a lawyer or a law firm and a non-lawyer that violates the
28
See Kincaid v. Mangum, 189 W.Va. 404, 413, 432 S.E.2d 74, 83 (1993) (“[W]hen
a certified question is not framed so that this Court is able to fully address the law which is
involved in the question, then this Court retains the power to reformulate questions certified
to it . . . .”).
17
provisions of Rule 5.4 of the West Virginia Rules of Professional Conduct is void as against
public policy and wholly unenforceable.
Based upon this Court’s concerns that the attorneys involved in this case may
have engaged in unethical conduct with regard to fee-sharing agreements, we are alerting
the Office of Disciplinary Counsel regarding the need for further inquiry into these matters.
See, e.g., Rose ex rel. Rose v. St. Paul Fire & Marine Ins. Co., 215 W.Va. 250, 258, 599
S.E.2d 673, 681 (2004) (“In light of the many potential transgressions in the record, we find
it necessary to refer this matter to the Office of Disciplinary Counsel for further review.”);
Covington v. Smith, 213 W.Va. 309, 582 S.E.2d 756 (2003) (referring matter to Office of
Disciplinary Counsel for further proceedings); Syl. Pt. 8, Gum v. Dudley, 202 W.Va. 476,
505 S.E.2d 391 (1997) (“When this Court believes a case before it presents the appearance
of conduct that does not comport with the West Virginia Rules of Professional Conduct
(RPC), we will comply with Rule 8.3(a) of the RPC and Canon 3D(2) of the Code of
Judicial Conduct, and refer the matter to the Office of Disciplinary Counsel for its review
and appropriate action.”). Accordingly, we direct the Clerk of the Supreme Court of
Appeals to transmit a certified copy of this opinion to the Office of Disciplinary Counsel.
18
IV. Conclusion
For the foregoing reasons, we modify the certified question to apply to the
specific rule of professional conduct in this matter, and answer the modified certified
question in the affirmative.
Certified question answered.
19